Pyramid Scheme

What is Pyramid Scheme? Pyramid scheme or comission for a distribution or sales of commodities where an individual receives gratuity, or an opportunity to receive an interest in money in which does not depend on the total or quantity of products, nor the services sold or distributed, but which is based on sponsorship or introduction of an individual or a participant in the scheme.

The features of this scheme :

• to set the number of sponsorship
• commission or bonus paid based on the sponsorship of fixed number of members, not based on the total sales made
• the promise of high income in the shortest time based on the number of sponsored members
• sponsored training or seminarswhich do not emphasise on the quality of products or how to market the product, but more on the way of recruitingnew members in this scheme
• the price of product or the service which is expensive and does not reflect the realvalue of the product or service mentioned

The government banned this scheme because it leans towards the get-rich quick scheme that offers returns only to the very few participants who belong to the top level, and not to the large number of participants who are still at the base level.

This pyramid scheme give negative aspects to the participants. There is only the first few participants or top level will get big commissions or great returns, and a large number of participants at the bottom level are made contributors so that the top level participants will enjoy the benefits.

What should we do if a scheme sponsor approaches us? First, we should check if the company they represent has a legal license that has been issued by any of the authorized government bodies. If the company turns out to be a direct selling company, please refer to the Ministry of Domestic Trade and Condumer Affairs to check if the company owns an authorized direct selling license. An authorized license number start with AJL 93xxxxx. Thorough checks can also be made through the government's homepage : http://www.kpdnhep.gov.my